CPA REG
State the basic tax formula ✔✔Gross income
- deductions for AGI
=AGI
- Deductions from AGI (standard or itemized deductions)
- exemptions
=Taxable Income
X Tax rate
= tax liability
- credits and prepayments
=tax due/refund
Identify the various filing statuses ✔✔Single
Married filing jointly
Married filing separately
Head of household
Widower
What are the criteria for filing single? ✔✔-Unmarried or legally separated from spouse at the
end of the tax year
-Does not qualify for another filing status
What are the criteria for filing married filing jointly? ✔✔At the end of the tax year
-married and living together
-married and living apart but not legally separated or divorced
What are the criteria for filing married filing separately? ✔✔at year-end of tax year:
-married and
-if one spouse wants to be responsible only for own tax or
-both spouses don't agree to file a joint return
What are the criteria for filing head of household? ✔✔-individual is not married, legally
separated, or is married and has lived apart from spouse for last 6 months of year
-not qualifying widow
-must be US citizen
-maintained a home, for more than half taxable year, is principle residence of
-qualifying child
,-dependent relative who resides with tp or
-dependent parent, regardless of residence
What are the criteria for qualifying widow(er)? ✔✔-unmarried at end of tax year and
-surviving spouse must maintain a household, for entire year, principal residence of qualifying
child
-surviving spouse must be entitled to dependency exemption for child
-qualifies for this status for two years after year of death of spouse
Qualifying Child ✔✔CARES
Close relative
Age limit (19/24)
Residency and filing requirement
Eliminate gross income text
Support test changes
Qualifying Relative ✔✔SUPORT
Support- (over 50%)
Under personal exemption of TAXABLE gross income
Precludes dependent filing a joint tax return test
Only citizens
Relative (half year)
Taxpayer resides with full year
What are requirements for a multiple support agreement? ✔✔-two or more people together
provide more than 50% of support, but no one contributes more than 50%
-to claim the exemption a person must provide more than 10% of support and meet other
dependency tests
-multiple support agreement must be filed
When should a cash basis tax payer report income? ✔✔Report income in year in which income
is either actually or constructively received, whether in cash or property
Define gross income ✔✔Includes all income from whatever source derived, unless specifically
excluded
What are the four categories of individual income? ✔✔Ordinary (wages, salaries)
Passive (real estate investment, limited partnership income, S-corp)
Portfolio (dividends, interest)
,Capital
Name some nontaxable fringe benefits (exclusions) ✔✔de minimis fringe benefit
qualified tuition reduction
qualified employee discounts
employer paid accident, medical and heath insurance
unless specifically excluded by law, fringe benefit is includable in gross income
Are life insurance premiums paid by an employer taxable to an employee? ✔✔Premiums on
the first $50,000 (face amount) of group term life insurance are not includable in gross income
Over $50,000 should be included. Calculated form IRS table
Give some examples of exempt interest ✔✔-State and municipal bonds
-Bonds of US Possession
-Series EE bonds
-Veterans Administration Insurance
What is the tax treatment of unearned income of a child who falls under the "kiddie tax" rules?
✔✔Net unearned income of a dependant child who falls under kiddie tax rules taxed at
parent's higher rate.
Net unearned income= child's total unearned income less child's standard deduction (1050) less
additional 1050 which is taxed at childs rate
State the tax treatment of property settlements in a divorce ✔✔Transfering spouse gets no
deduction for payment made or property transferred
Payment not includable in gross income of spouse receiving payment or property
What are the requirements for alimony to be deducible by the paying former spouse and
includable by the recipient? ✔✔-Payments must be legally required by a written agreement
-Must be in cash or its equivalent
-Payments can't extend beyond death of payee
-Can't be made to members of same household
-No joint tax return filed
Child support must be paid first
When are funds in a nondeductible IRA taxable? ✔✔-Only the interest is taxable when
withdrawn
, -Principal nontaxable
-Pro rata applied to determine taxable amount
What is the formula to determine the excludable portion of an annuity? ✔✔Investment in
contract/ age factor in months = excludable amount in current year
If annuitant lives longer than factor, further payments fully taxable
In premature distributions of an IRA, what are the exceptions to penalty tax? ✔✔HIM DEAD
Home- up to $10,000 1st & 2nd Home
Insurance- medical- unemployed or self employed
Medical expenses excess of 10% AGI
Disability
Education expenses
And
Death
What are the rules to determine taxable Social Security Benefits? ✔✔Taxpayers into 5
categories based on level of provisional income, defined as AGI plus tax-exempt interest plus
50% Social security benefits
-Low income - no social security benefits taxable
-Lower middle income- less than 50% taxable
-Middle Income (25k/32k) 50% taxable
-Upper middle income 50-85% taxable
-Upper income (over 34/44) 85% taxable
Are scholarships and fellowships includable in gross income? ✔✔No for degree seeking student
as long as amounts spent on tuition, fees, books, supplies (not room and board) and can't work
for it
What are the tests for foreign-earned income exclusion? ✔✔bona fide residence test (an entire
taxable year)
physical presence test (330 full days out of 12 consecutive months)
List some nontaxable misc. income items (exclusions) ✔✔Life insurance proceeds
Gifts and inheritances
Medicare benefits
State the basic tax formula ✔✔Gross income
- deductions for AGI
=AGI
- Deductions from AGI (standard or itemized deductions)
- exemptions
=Taxable Income
X Tax rate
= tax liability
- credits and prepayments
=tax due/refund
Identify the various filing statuses ✔✔Single
Married filing jointly
Married filing separately
Head of household
Widower
What are the criteria for filing single? ✔✔-Unmarried or legally separated from spouse at the
end of the tax year
-Does not qualify for another filing status
What are the criteria for filing married filing jointly? ✔✔At the end of the tax year
-married and living together
-married and living apart but not legally separated or divorced
What are the criteria for filing married filing separately? ✔✔at year-end of tax year:
-married and
-if one spouse wants to be responsible only for own tax or
-both spouses don't agree to file a joint return
What are the criteria for filing head of household? ✔✔-individual is not married, legally
separated, or is married and has lived apart from spouse for last 6 months of year
-not qualifying widow
-must be US citizen
-maintained a home, for more than half taxable year, is principle residence of
-qualifying child
,-dependent relative who resides with tp or
-dependent parent, regardless of residence
What are the criteria for qualifying widow(er)? ✔✔-unmarried at end of tax year and
-surviving spouse must maintain a household, for entire year, principal residence of qualifying
child
-surviving spouse must be entitled to dependency exemption for child
-qualifies for this status for two years after year of death of spouse
Qualifying Child ✔✔CARES
Close relative
Age limit (19/24)
Residency and filing requirement
Eliminate gross income text
Support test changes
Qualifying Relative ✔✔SUPORT
Support- (over 50%)
Under personal exemption of TAXABLE gross income
Precludes dependent filing a joint tax return test
Only citizens
Relative (half year)
Taxpayer resides with full year
What are requirements for a multiple support agreement? ✔✔-two or more people together
provide more than 50% of support, but no one contributes more than 50%
-to claim the exemption a person must provide more than 10% of support and meet other
dependency tests
-multiple support agreement must be filed
When should a cash basis tax payer report income? ✔✔Report income in year in which income
is either actually or constructively received, whether in cash or property
Define gross income ✔✔Includes all income from whatever source derived, unless specifically
excluded
What are the four categories of individual income? ✔✔Ordinary (wages, salaries)
Passive (real estate investment, limited partnership income, S-corp)
Portfolio (dividends, interest)
,Capital
Name some nontaxable fringe benefits (exclusions) ✔✔de minimis fringe benefit
qualified tuition reduction
qualified employee discounts
employer paid accident, medical and heath insurance
unless specifically excluded by law, fringe benefit is includable in gross income
Are life insurance premiums paid by an employer taxable to an employee? ✔✔Premiums on
the first $50,000 (face amount) of group term life insurance are not includable in gross income
Over $50,000 should be included. Calculated form IRS table
Give some examples of exempt interest ✔✔-State and municipal bonds
-Bonds of US Possession
-Series EE bonds
-Veterans Administration Insurance
What is the tax treatment of unearned income of a child who falls under the "kiddie tax" rules?
✔✔Net unearned income of a dependant child who falls under kiddie tax rules taxed at
parent's higher rate.
Net unearned income= child's total unearned income less child's standard deduction (1050) less
additional 1050 which is taxed at childs rate
State the tax treatment of property settlements in a divorce ✔✔Transfering spouse gets no
deduction for payment made or property transferred
Payment not includable in gross income of spouse receiving payment or property
What are the requirements for alimony to be deducible by the paying former spouse and
includable by the recipient? ✔✔-Payments must be legally required by a written agreement
-Must be in cash or its equivalent
-Payments can't extend beyond death of payee
-Can't be made to members of same household
-No joint tax return filed
Child support must be paid first
When are funds in a nondeductible IRA taxable? ✔✔-Only the interest is taxable when
withdrawn
, -Principal nontaxable
-Pro rata applied to determine taxable amount
What is the formula to determine the excludable portion of an annuity? ✔✔Investment in
contract/ age factor in months = excludable amount in current year
If annuitant lives longer than factor, further payments fully taxable
In premature distributions of an IRA, what are the exceptions to penalty tax? ✔✔HIM DEAD
Home- up to $10,000 1st & 2nd Home
Insurance- medical- unemployed or self employed
Medical expenses excess of 10% AGI
Disability
Education expenses
And
Death
What are the rules to determine taxable Social Security Benefits? ✔✔Taxpayers into 5
categories based on level of provisional income, defined as AGI plus tax-exempt interest plus
50% Social security benefits
-Low income - no social security benefits taxable
-Lower middle income- less than 50% taxable
-Middle Income (25k/32k) 50% taxable
-Upper middle income 50-85% taxable
-Upper income (over 34/44) 85% taxable
Are scholarships and fellowships includable in gross income? ✔✔No for degree seeking student
as long as amounts spent on tuition, fees, books, supplies (not room and board) and can't work
for it
What are the tests for foreign-earned income exclusion? ✔✔bona fide residence test (an entire
taxable year)
physical presence test (330 full days out of 12 consecutive months)
List some nontaxable misc. income items (exclusions) ✔✔Life insurance proceeds
Gifts and inheritances
Medicare benefits
